To invest in a franchise, the franchisee must first pay an initial fee for the privileges to use the business, training, and the equipment required by that particular franchise model. Once the business starts trading, the franchisee will usually pay the franchisor an ongoing royalty fee, either on a weekly, monthly or quarterly basis. This payment is usually calculated as a percentage of the franchise businesses gross turn over. After the contract has been signed, the franchisee will open a replica of the franchise business, under the guidance of the franchisor.
The franchisee will not have as much influence over the business as he or she would have over their own business, however, investing in a franchise business will require you to follow the proven business format. Examples of proven business formats or franchise businesses include McDonalds, KFC, Pizza Hut and Subway to name a few. There are further opportunities with new franchise business brands, where the initial invest may be less than a more established franchise brand, and potentially offer greater profits.